Sanity check: Is my teacher wrong about this word problem?

Question

I'm taking Engineering Economy this semester. I'm actually liking it so far!

My teacher posted solutions to homework problems (picture 3), one of which was this one:

My answer is this:

$$P = \$4000, i=10\% $$ $$F = P + P(1 + i)$$ $$= \$4000 + \$4000(1.1) $$ $$=\$4000 + \$4400 $$ $$= \$8400$$

Another problem with different variable values agrees to this method. In fact, the Chegg solution with these variables agrees to both the method and the solution.

My teacher arrived at $F=\$8800$. I think they made an error in their calculations:

Who is correct here?

Please let me know. Thanks! -Jon

Your calculations are correct, it should be $$8400$. The only way I can see to justify the answer of $$8800$ is if the bonus itself also increased by $10$% each year -- but that's not what the question says. — postmortes, Aug 25 '18 at 18:01

score 2 · Accepted Answer · answered Sep 02 '18 at 02:28

2

You are right if the bonus is indeed not increased. Your teacher is right if the bonus is increased. There is no indication that the bonus is increased. Ambiguity goes to no indication. So, you're right.

answered Sep 02 '18 at 02:28

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Sanity check: Is my teacher wrong about this word problem?

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